Largest investments: When to worry? What to do?

I have published a series of blogs in recent years which listed my largest investments and sometimes shared the reasons for me investing in those assets.

This blog is going to talk about those largest investments in my portfolio but it will have a little twist.

I have always said that as an investor for income, the most important thing we want to see from our investments is the ability to generate income sustainably and a willingness to share that income generated with us.

I produced a YouTube video to talk about this and for those who are not subscribed to my YouTube channel, this is the video:

There are people who are worried about capital loss and that passive income generated from our investments is unable to cover the capital loss.

They might find it odd why AK is not concerned about this?

Well, to me, capital loss when it is on paper isn't at all damaging unless we are using money that we shouldn't be using to invest with.

Recall what Warren Buffett said about tide going out and we see who has been swimming naked.

Two groups of people should be very worried about capital loss on paper.

1. People who are using leverage might get hit by margin calls as the market value of their investments decline.

2. People who are using money they need for other purposes in the next few months or years as they might have to liquidate at a loss.

If we are not in the same situation as these people, I don't see any good reason to worry.

We just have to make sure that what we are invested in are bona fide income generating assets and that they will still be generating income for us for a long, long time to come.

What to avoid?

Remember, no one cares more about our money than we do and if it sounds too good to be true, it could well be.

Now, for the twist.

This is not something I think is meaningful but it might be fun reading for some people in a perverse way and it could also make some people feel better.

How so?

They are not the only ones losing money (on paper.)

OK, here goes.

$500,000 or more

CPF

When equities do badly, we appreciate the CPF a lot more.

CPF might generate "only" 2.5% to 5% per annum in return for us but we won't ever suffer any capital loss.

Of course, the Singapore Savings Bond is now a good alternative to CPF as interest rate has risen significantly and I blogged about this recently.

There is always a place for such risk free and volatility free alternatives in our portfolios as they could also outperform during bear markets.

$350,000 to $499,999

AIMS APAC REIT
IREIT Global
OCBC

AIMS APAC REIT is an example of how staying invested in bona fide income generating assets through ups and downs in the stock market can only be a good idea.

My investment in AIMS APAC REIT is free of cost for some time now, still generating regular income and also very much in the black.

IREIT Global which has a shorter history, on the other hand, is very much in the red.

However, I do not see anything wrong with the fundamentals and, if anything, at the current price, the REIT offers even better value for money.

I expect IREIT Global to continue generating meaningful income for me and I will stay invested.

OCBC became my largest investment in the local banking sector a few months ago as I averaged up.

Although I averaged up, my investment in OCBC is still very much in the black.

Just like DBS and UOB, OCBC is a reliable income generator which is my primary consideration as an investor for income.

$200,000 to $349,999

ComfortDelgro
DBS
UOB
Wilmar International

ComfortDelgro joins IREIT Global as an investment that is suffering a paper loss in my portfolio since most of the investment was made between $1.90 to $2.00 a share a few years ago.

However, ComfortDelgro is more likely than not going to continue generating an income for me as long as we are not hit by another disaster as damaging as the COVID-19 pandemic.

There is no reason not to stay invested especially when I expect things to improve.

My investments in DBS and UOB, just like my investment in OCBC, are very much in the black.

Whatever I said about OCBC would apply to DBS and UOB as well.

My investment in Wilmar is also in the black (for now.)

Wilmar has shown itself to be a reliable income generator over the years but, to be honest, I am staying invested in Wilmar also because I think it is extremely undervalued.

So, there is a bit of an asset play angle.

$100,000 to $199,999

Sabana REIT
Capitaland China Trust
Frasers Logistics Trust

My investment in Sabana REIT is very much in the black as most of the investment was made when the low ball offer by ESR REIT was rejected.

Sabana REIT is undervalued and because their assets are all in Singapore, there is no worry about foreign exchange issues unlike IREIT Global.

My investment in Capitaland China Trust is, however, in the red but just not as red as IREIT Global.

My investment in Frasers Logistics Trust is very much in the black just like my investment in AIMS APAC REIT but it isn't free of cost yet.

I expect Sabana REIT, Capitaland China Trust and Frasers Logistics Trust to continue to generate income for me.

In fact, I do not see any of my largest investments not generating income for me at least in the next few years.

Three of my largest investments are trading at below my average prices but that doesn't bother me as long as they do the job I expect them to do.

On a portfolio level, I am not doing too badly.

Yes, don't put all our eggs in one basket.

When would I be worried?

As an investor for income, I think about whether my investments are able to generate the income I expect from them.

So, if an asset should give me good reason to think that it is unable to reliably generate an income for me, I would worry.

Don't be too optimistic.

Have a meaningful percentage of our portfolio in fixed income.

Don't be too pessimistic.

Stay invested in equities that will likely deliver better returns than fixed income in the long run.

Be pragmatic.

There are worse situations to be in than being paid regularly while we wait for things to improve.

I hope everyone feels better after reading this blog but of course this is rather unlikely.

How are you feeling after reading this blog?

Recently published:
1. CPF or SSB? No brainer.
2. 3Q 2022 passive income.

References:
1. Worried as dividends and interest income reduced.
2. Largest investments (2Q 2022.)